What it takes to be a CEO in the 2020s

Date: 06‑02‑2020

Source: The Economist

The rules of management are being ripped up. Bosses need to adapt

On paper this is a golden age for bosses. Chief executives have vast power. The 500 people who run America’s largest listed firms hold sway over 26m staff. Profits are high and the economy is purring. The pay is fantastic: the median of those ceos pockets $13m a year. Sundar Pichai at Alphabet has just got a deal worth up to $246m by 2023. The risks are tolerable: your chances of being fired or retiring in any year are about 10%. ceos often get away with a dreadful performance. In April Ginni Rometty will stand down from ibm after eight years in which Big Blue’s shares have trailed the stockmarket by 202%. Adam Neumann got high in private jets and lost $4bn before being ousted from WeWork last year. The only big drawback is all those meetings, which eat up two‑thirds of the typical boss’s working hours.

Yet ceos say the job has got harder. Most point the finger at “disruption”, the idea that competition is more intense. But they have been saying that for years. In fact the evidence suggests that, as America’s economy has become more sclerotic, big firms have been able to count on cranking out high profits for longer. Nonetheless, bosses are right that something has changed. The nature of the job is being disrupted. In particular, ceos’ mechanism for exercising control over their vast enterprises is failing, and where and why firms operate is in flux. That has big implications for business, and for anyone climbing the corporate ladder.

The future of management education

Date: 31-10-2019
Source: The Economist

We have obtained a copy of a recent letter to a business dean

Dear Dean Whiteboard,

On behalf of the trustees of the Gordon Gekko Business School, I write with a helicopter view on our beloved institution. There is good news and bad. First, congratulations are in order. Under your leadership, GorGeBS has again been named by The Economist as one of the world’s top 100 business schools.

The bad news is that our best-of-breed status is in jeopardy because the very business model of our school faces tectonic challenges. Demand is plunging. Our mba applications are down by a quarter. Across America, applications to business schools have fallen for five years in a row. Even at Harvard, they are down this year by about 6%.

One reason is a drop in international applicants, many of whom are put off by America’s anti-immigration policies. But before you rush to blame all those law graduates staffing up government departments, the bigger factor is that we are charging too much. Our mba costs nearly twice as much as it did a decade ago, but nobody believes we are delivering twice as much value.

Even if WeWork is in trouble the office is still being reinvented

Date: 26-09-2019
Source: The Economist

It could lead to a two-tier system

“From nine till five, I have to spend my time at work,” warbled Martha and the Muffins back in 1980. “My job is very boring, I’m an office clerk.” Many of the hundreds of millions of people who trek into an office will feel as despondent at the prospect as Martha did. The office needs a revamp. But the crisis at WeWork, a trendy office-rental firm whose boss, Adam Neumann (pictured), stepped down this week after its attempt to float its shares turned into a debacle, shows that businesses are still struggling to come up with a new format.

The large office, like the factory, is an invention of the past two centuries. The factory arose because of powered machinery, which required workers to be gathered in one place. Big offices grew from the need to process lots of paperwork, and for managers to instruct clerks on what to do. But now the internet, personal computing and handheld devices mean that transactions can be dealt with on-screen and managers can instantly communicate with their workers, wherever they are. The need for staff to be in one place has been dramatically reduced.

A new model may take time to emerge—electric power was first harnessed in the 1880s but it was not until the 1920s that factories changed their layouts to make full use of it. The new model will have to balance three factors: the desire of many workers for a flexible schedule; the high cost for firms of maintaining office space; and the countervailing desire to gather skilled workers in one place, in the hope that this enhances collaboration.

Die Zukunft der Arbeit

Stamina, intelligence, ego: which personality traits make the best leaders?

Date: 11-08-2019
Source: The Guardian: David Runciman

Some say a second-class mind makes for a first-class leader, others that madness is an essential feature of the role. From Trump and Obama, to Blair and Boris Johnson, which personalities are born to rule?

‘The only game-changing asset Johnson has that his predecessor may have lacked is a willingness to embrace his inner Trump’

There is a story that often gets told about modern presidents and prime ministers, and sometimes gets told by them as well. The politician spends half a lifetime working tirelessly towards the top job, with the goal of making a real difference once he or she gets there. They issue their instructions. Dutiful officials nod along encouragingly. But nothing really changes. Once the door to the Oval Office or No 10 closes behind them, and they settle their feet under the desk, the new president or prime minister finds out that it’s just another room and just another desk. It feels as if true power is still somewhere out of reach.

In politics you should never assume that there is a pot of gold at the end of the rainbow. It’s better to know how little is waiting for you, like a weird inversion of the parable of The Wizard of Oz. In place of the Yellow Brick Road is the greasy pole, which has to be ascended to reach the Emerald City. Yet the successful climber finds that his or her fate is not to encounter a shrunken wizard at the end of it. Instead it is to become that person: the impostor behind the curtain.

How do politicians react when they discover themselves in that position? Some, like George W Bush, never quite acknowledge it. Others, like Tony Blair, decide to do something about it. Blair concluded that he had to build the machinery that would enable his administration to deliver on its ambitions. He called this instrument “the delivery unit”. It was designed to make sure that the levers in Downing Street were connected to the rest of government. Yet even after 10 years in power, Blair was frustrated with how little he had managed to achieve. One reason he was reluctant to leave office at the end was a nagging feeling that he was only just beginning to get the hang of it.

How Jeffrey Immelt’s ‘Success Theater’ Masked the Rot at GE

Date: 21-02-2018
Source: The Wall Street Journal

A culture that disdained bad news contributed to overoptimistic forecasts and botched strategies

Former GE Chairman and CEO Jeff Immelt

Jeffrey Immelt, the longtime boss at General Electric Co. , was a polished
presenter who held court each year at a waterfront resort off Sarasota, Fla., where industrial executives and Wall Street listened for his outlook on the conglomerate.

“This is a strong, very strong company,” Mr. Immelt said at the event last May.

On that Wednesday morning, though, he looked shaky to some people in attendance, running quickly through highlights of 27 slides in the ballroom of the Resort at Longboat Key Club. He defended his long-held 2018 profit goal, an optimistic benchmark Wall Street had long abandoned.

“It’s not crap. It’s pretty good really,” he told the room, referring to GE’s recent financial performance. “Today, when I think about where the stock is compared to what the company is, it’s a mismatch.”

It was a mismatch. On that day, GE shares were trading near $28. They would go on to collapse over the next six months while the stock market set fresh records. Today, they trade below $15.

IBM’s Growth Comes at a Cost

Date: 23-01-2018
Source: The Wall Street Journal

Aging tech giant’s revenue finally rises, but investments expected to curb earnings growth for year ahead

Even for IBM , growth doesn’t quite solve everything.

International Business Machines reported Thursday that fourth-quarter revenue rose nearly 4% year over year. Even adjusting for a boost from favorable currency rates, Big Blue’s top line managed its first period of growth in nearly six years. Strong sales of systems hardware business along with IBM’s growing cloud-computing service contributed to the uplift.

Still, IBM’s shares fell Friday, much like they have done following 10 of its last 12 quarterly reports. A bit of growth, as it turns out, isn’t quite enough to assuage concerns about how the company gets there. Fourth-quarter gross margins slipped below the 50% line for the first time in five years for what is typically the company’s strongest seasonal period. And, while IBM did project annual revenue growth for 2018, it is unclear if the company can do that without continued help from favorable exchange rates.

Given that IBM’s stock had jumped more than 15% since its last quarterly report, some disappointment was bound to set in. The company also expects a slight drop in free cash flow in 2018 due to increased capital spending in key segments to drive future growth. IBM did manage to close 2017 with a small gain in adjusted per-share earnings of $13.80 after three years of declines. But the company also projected flat earnings for 2018, given its need to invest more in its business.

Those investments have borne some fruit. The “strategic imperatives” IBM has been so focused on for the last few years accounted for 46% of total revenue for 2017, compared to 41% the year before. While encouraging, for an overall business that has been in steady decline for the last six years, investors are now willing to take only so much on faith.

IBM Revenue Grows for the First Time Since 2012

Date: 19-01-2018
Source: The Wall Street Journal

A $5.5 billion charge related to the new U.S. tax law pushes fourth-quarter results into the red

International Business Machines Corp. reported higher revenue for the first time in 23 quarters and signaled continued growth into 2018, giving Chief Executive Ginni Rometty breathing space as she tries to turn around the century-old tech giant.

Fourth-quarter revenue rose 3.6% to $22.54 billion. The last time IBM had revenue growth from the prior year was the first quarter of 2012, Ms. Rometty’s first as chief.

Several factors drove growth in the latest quarter: sales of industrial-strength computers—which the company typically refreshes every few years— rose 32% to $3.33 billion, while cloud-computing revenue climbed 30% to $5.5 billion. Also, currency exchange rates have been working in IBM’s favor lately, accounting for 3 percentage points of the quarter’s revenue growth after years of being a headwind.

IBM said it took a $5.5 billion charge related to the new U.S. tax law, helping to push it into the red for the period. Its tax rate, excluding the charge but including certain one-time benefits, was 6%.

In all, the company reported a fourth-quarter loss of $1.05 billion, or $1.14 a share, compared with profit of $4.5 billion, or $4.72 a share, a year earlier.

Johnson: The importance of pauses in conversation

Date: 14-12-2017
Source: The Economist

“Um”, “uh”, “mm-hmm” and interruption are not killers of conversation, but its lubricants

MARGARET THATCHER was known for a voice that brooked no disagreement. While still in opposition, she had taken elocution lessons to sound more forceful. Despite this, she was often interrupted in interviews as prime minister, and in 1982, three researchers set out to understand why. They played clips from one of her interviews to a variety of people. The clips included segments that ended in interruption (while editing out the interruptions themselves). More often than not, those hearing the interrupted phrases thought that the prime minister was ending her conversational turn. It seems her interviewer had come to a similar conclusion.

Why? Conversation, it turns out, is a finely tuned machine, as Nick Enfield, a linguist at the University of Sydney, suggests in “How We Talk”. Humans mostly follow a rule called “no gap, no overlap”, reacting to the end of a conversational turn by beginning their own in about 200 milliseconds—about the time it takes a sprinter to respond to the starting gun. This is all the more remarkable given that it takes about 600 milliseconds for someone to work out what they are going to say by mentally retrieving the words and organising how they are to be expressed.

People, therefore, must plan to begin speaking before their conversation partner has stopped. That requires a fine attention to the cues signalling the end of a turn, such as a lengthening of syllables and a drop in pitch. As it happens, using a downward shift of pitch is also a frequent piece of advice given to those who want to sound more authoritative—like Thatcher. The researchers studying the times she was interrupted found precisely that a sharp drop in her pitch accurately predicted an interruption.

Another Thing Amazon Is Disrupting: Business-School Recruiting

Date: 06-10-2017
Source: The Wall Street Journal

Amazon has hired some 1,000 newly minted M.B.A.s in the past year

Jewel Lai, center, a student at Dartmouth’s Tuck School of Business, spoke with Lindsey Windham, right, a senior marketing manager at Amazon, after a Sept. 19 information session led by Tuck alumni working at Amazon.

Amazon.com Inc., disrupter of industries from book selling to grocery shopping, has found its latest sector to upend—recruiting at the nation’s elite business schools.

The Seattle-based retail giant is now the top recruiter at the business schools of Carnegie Mellon University, Duke University and University of California, Berkeley. It is the biggest internship destination for first-year M.B.A.s at the University of Michigan, Massachusetts Institute of Technology, Dartmouth College and Duke. Amazon took in more interns from the University of Chicago’s Booth School of Business than either Bain & Co. or McKinsey & Co., which were until recently among the school’s top hirers of interns, according to Madhav Rajan, Booth’s dean.